Why the rise in auto insurance premiums?
Auto insurance has gone up for many reasons. It costs more for repairs. There are more claims, notably due to climate change. And car theft is also on the rise.
If you’ve noticed that your auto insurance premiums have gone up, you’re not alone; most motorists find themselves in the same situation. There are several factors behind rising premiums.
It costs much more to repair a vehicle
First off, it’s important to understand that, according to the Groupement des assureurs automobiles du Québec (Auto Insurers Group), the average cost to repair a vehicle has increased by over 55% in the last ten years. There are many reasons for this:
Vehicles are changing rapidly
Technological advancements in the automotive industry are being made at breakneck speed. And we’re not just talking about electric or self-driving vehicles. Whatever the type of vehicle, or the manufacturer, cars are now veritable computers on wheels and are more complex than ever. Almost everything on cars is linked to a central computer. We’re no longer in the realm of your good old-fashioned cruise control; now we’re talking about vehicles with advanced driver-assistance systems. And between the two, there’s a whole spectrum of possibilities.
Most new vehicles are equipped with electronic gadgets. And this is the case for even the simplest components, like rear-view mirrors and bumpers, which are now often equipped with sensors. These are useful tools, but they aren’t free.
A more skilled workforce is needed
More technology means more need for expertise. Garages have no choice but to hire qualified automotive technicians or pay for additional training. Again, these qualifications have a price, and, in the context of labour shortages, the hourly rate charged by garages is going up too.
Parts are more expensive and in short supply
The cost of replacement parts has also greatly increased over the past year. According to the Insurance Bureau of Canada (IBC), the main cause is, not surprisingly, inflation, which hits hard and spares no sector.
There are also supply chain disruptions, of which the COVID-19 pandemic made us well aware. Port and railway labour disputes are another example of one-off events that can put strains on the supply chain. These events lead to replacement part scarcity. And without parts, repairs take more time, meaning insurers pay more for longer rental periods on loaner vehicles, as well.
Climate change is contributing to increased claims
Climate change also affects the rise in premiums. Extreme weather events have become more common and more intense in the last few years. So much so that the number of claims due to these events has increased.
While hail or freezing rain can damage your vehicle directly, other events can have an indirect effect. Heavy rains, heat waves, extreme temperature variations: Each of these phenomena affect your vehicle and the pavement you drive on, making incidents and accidents more frequent. And current climate data suggests that we’ll have to get used to it.
Vehicle theft is on the rise
According to the IBC, there has also been an increase in vehicle theft across the country. In Montreal alone, vehicle thefts have more than doubled in the past few years. According to several experts, the Port of Montreal has sadly become a hub for exporting stolen vehicles.
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